Banking on Corporate Social Responsibility in Australia: CaseStudy

| August 26, 2015

Banking on Corporate Social Responsibility in Australia: CaseStudy

ES3500 CaseStudy

BankingonCorporate Social Responsibility
inAustralia: CaseStudy

AmandaRayner,BankWest’sHeadofStrategy,hadjustfinishedhermeetingwiththe ManagingDirector,JackSilvertonandwasheadingbacktoheroffice. Ithadbeena longsessionbutitwasimportanttheywerebothclearonhowBankWest’snew CorporateSocialResponsibility(CSR) strategywouldberolledout. JacksawtheCSR
initiativeascentraltoBankWest’songoingdevelopmentofitsexternalbrandandcoreto itsinternalcultureandemployeevalueproposition. JackknewthatCSRwasalsoa priorityforitsparentcompany,theCommonwealthBankofAustralia,oneofAustralia’s bigfourbanks,whichhadacquiredBankWestinDecember2008. Thiswasjustbefore JackhadbecomeManagingDirectorinJanuary2009,havingpreviouslyheldsenior positionsattheCommonwealthBank.

JackandAmandahadagreedthatCSRwasaboutconfiguringBankWest’sprinciples, policies,processes,practicesandprogramstoachievesomesocialgoodbeyond BankWest’sinterests. Itneededtobeanapproachthatcreatedvalueandpositively impactedthefourkeyCSRactivityareasof
•    community
•    marketplace
•    environment
•    workplace.

TheyhaddiscussedtheneedfortheBanktohaveadedicatedgovernancestructurein placetosteertheagenda,embedtheagreedapproachintothelinesofbusinessand managerisk,auditing,decision-making,measurementandfunding. Amandahad outlinedhowshesawthestrategywouldmeetcommercial,legalandpublic expectationsandensuretheBankbehavedethically. Jackhadstressedthatfocusing oncommunityinvolvementandbuildingmeaningfulrelationshipswiththerestofsociety wasparamountaswasensuringthatCSRwasintegratedintotheBank’sday-to-day business.

InfinalisingtheBankWestapproachtoCSR,AmandaandJackhadspentquitesome timetalkingaboutBankWest’shistoryandhowthatcurrentlypositionedthe organisation. AmandahadbeenwithBankWestsince1997,twoCEOsprior,soshe wasabletosupplyalotofdetail.  AmandahadexplainedthatBankWesthadbeen establishedin1895asagovernment-ownedagriculturalbankwithinWesternAustralia tohelpdevelopthefarmingindustry. In1911therewasanexpansionofactivityasit becameamortgagebank. In1945,theBankbecameafulltradingbankandwas
renamedtheRuralandIndustriesBankofWesternAustralia.In1994theBankchanged itsnametoBankofWesternAustraliaLtdwithatradingnameofBankWestandtookon anewcorporateidentityandliverytoclearlyidentifytheBankwithWesternAustraliaas awhole.  In1995,afteralmost100yearsundergovernmentownership,BankWestwas
100%acquiredbytheBankofScotland,a300yearoldmajorUKbank.  In1996
BankWestlistedontheAustralianStockExchangeasapubliccompanyandupto50%
ofthesharesweremadeavailableforpeopletopurchase.

In1997anewerainBankWestbeganwiththeappointmentofaManagingDirector, TomBooth,whocamefromtheNationalAustraliaBank,Australia’slargestbank. Tom setaboutdevelopinganewwayofworkingwithintheBankandfocusedondelivering superiorvaluetocustomers,creatinganexcitingandrewardingenvironmentforstaff andincreasingwealthforshareholders. Heintroducedasetofcorevaluescalled
GuidingPrinciplesandpromotedtheseasthewaytodobusiness.  Duringhistenurehe oversawarangeofCSRpracticesincludingsponsorshipofcommunityandsporting groups,institutionofemployeeprogramslikeInvestorsinPeople,andtriplebottomline (people,profits,planet)reporting. InMay2003,HBOSplc,formedthrougha2001 mergerofBankofScotlandandtheUKHalifaxBank,acquiredalltheoutstanding
sharesinBankWest.On26August2003theFederalCourtofAustraliaapprovedthe
shareschemeandtradinginBankWestsharesontheAustralianStockExchange ceased,therebysignifyingtheendingofanotherphaseoftheiconicWesternAustralian financialservicesinstitution. TomremainedasBankWest’sManagingDirectoruntilmid
2004atwhichpointanewCEOtookoverthereins.

TheHBOSAustraliaCEO,DougWentworth,tookuphispositioninJuly2004having cometothepositionfromWestpac,oneofAustralia’sbigfourbanks. Hehad responsibilityfortheHBOSAustraliaGroup,whichincludedBankWest,StAndrew’s Insurance,CapitalFinance,andBOSInternational. Dougledthedrivetoreplicatethe HBOSUKparentcompany’strackrecordofofferingcompetitive,value-for-moneyand customer-focusedsolutionsforthebenefitofAustraliancustomers. HBOSUKhadan establishedrecordofCSRwithinitiativessuchas
•    Foundationforprovidingdonationstodesignatedcauses
•    Staffvolunteeringprogramtosupportcommunitynot-for-profits
•    Paperrecycling
•    Improvedaccessibilitytoproductsforthedisadvantaged
•    Peoplemeasuretoincreasestaffengagement
•    Communitysponsorships
•    Socialandenvironmentalriskmanagement
MindfulofHBOSUK’scommitmenttoCSR,Dougbegantoincorporatetheseintothe differentHBOSAustraliabusinesseswithvaryingdegreesofsuccess. Engaginghis DivisionalHeadswassometimesachallengeastheywereoftenunconvincedofthe costsversusbenefitsofparticularinitiatives.

HBOSAustralia’sinterestinCSRtookabitofabackseatastheimpactoftheworld creditcrunchresultingfromtheFebruary2007collapseoftheUSsub-primeloanmarket begantospread. InAugust2007HBOSUK’s wholesalelendingstartedtodryup leavingHBOS witha“fundinggap”of£198billioncausedbytheir£456billioninloans
tocustomersand£258billionindepositsfromcustomers.Innormalcircumstances HBOSwouldraisethismoneyinthewholesalemoneymarkets,butthecreditcrunch, wasmakingitincreasinglydifficult. Overthenextfewmonthsfinancialviabilitybecame thekeyfocusforHBOSUKresultingintheirannouncementon31July2008ofaprofit fallof51%. On18September2008TSBLloyds,amajorUKbankingentity,tookover allHBOSoperations,includingHBOSAustralia.  On8October2008the CommonwealthBankofAustraliaboughtBankWestfor$2.1billionwiththesale
becomingfinalisedon19December2008. TheHBOSAustraliaCEO,DougWentworth,
remainedwiththeorganisationuntilJackSilvertontookoverasManagingDirectorof
BankWeston6Jan2009.

AsJackandAmandahaddiscussed,havingspentthelasttwoyearsworkingthrough theGlobalFinancialCrisisissuesandthemergingwiththeCommonwealthBank,now wasagoodtimetoemphasiseBankWest’scontributionstoCorporateSocial Responsibility. Itwasalsoawaytocounteractthecurrent‘bankbashing’thatwas happeninginAustralia,whichhadbeeninflamedbythemajorbanksraisingtheirloan interestratesabovetherisessetbytheReserveBank. Amandaknewthatallbank activitieswereunderthemediaspotlightandthatgoodnewsstorieswereimportant.

Onceshereachedheroffice,Amandasetaboutgatheringhermaterialforhernext meetingwiththeHeadsofeachBankWestDivision. Shethoughtabouthowshewould handlethequestionssheknewtheDivisionalHeadswouldraise
•    HowwouldcustomersviewBankWest’smorepublicmoveintoCSR?
•    WouldcustomersconsidertheBank’sCSRapproachaspartofalong-term businessstrategy,orwouldtheyseeitmerelyasamarketinggimmick?
•    WhatwerethebenefitsofaCSRpolicy?
•    Howmuchinvestmentdidthisstrategyrequire?
•    Wouldadoptingsocio-environmentalstandardsmeanthey’dloseclientsand dealsiftheyoperatedinsectorssuchasasbestos,fishharvestingortimber felling?
•    WhatwouldhappeniftheCSRpolicyputfinancialresultsatrisk?

AmandacheckedhernotesonthebenefitsofBankWestbecomingmoreactiveinCSR
andtheriskimpactofchangingnothing
•    Benefits
o    Improvedsocialimpact
o    Positiveenvironmentalimpact
o    Improvedstaffsatisfactionandmorale
o    Reducedstaffturnover
o    Improvedproductivity
o    Improvedcustomersatisfaction
o    Improvedbrandequity/reputation
o    Reducedcosts
o    Improvedrevenues
•    Riskofchangingnothing
o    GrowthwillbearisktoCBA’sstandingandreputation
o    Parentalpressuretoact
o    Legislativepressure
o    Negativepublicity
o    Slowergrowth
o    Long-termreputationaldamage
o    Trailingcompetitors
o    Increasedturnover/HRcosts

SatisfiedtherewasacompellingargumentforfocusingonCSR,Amandareviewedthe materialsheandherteamhadspentthelastsixmonthscompiling(seeExhibits)and feltsureshewouldbeabletoprovidetheDivisionalHeadswiththeanswers. Shewas confidentthatshecouldconvincethemthatCSRwouldaidBankWest’ssuccess.

Exhibit1:BankWestCSRCostsandBenefits

AgoodCSRstrategy needstocombinethreekeyelementstobesuccessful

VALUE

SUSTAINABILITY

APPROACH

“…corporationsrecognisethatsustainablebusiness operationandthussustainablefinancialperformancearedependantonbuildingandmaintainingthetrustandrespectofthecommunity,andinthevastmajorityofcases,actaccordingly…”
–InstituteofCharteredAccountants,Australia

Exhibit2:BankWestCSRValue

WecancreatesignificantvaluethroughimprovedCorporateSocialResponsibility

StaffEngagement

CommunityImpact

EnvironmentalImpact

Attract&RetainStaff/ ImproveProductivity/ BoostSatisfaction&Morale

AttractandRetain Customersand Colleagues

LowerEnergy Consumption
&WasteOutput

LowerRecruitmentCosts/HigherRevenuesperFTE/LowerPersonnelCosts

HigherRevenue

Supportfor“BestPeople”

Lower EnergyCosts

Workplace

Community

CREATING
VALUE
Environment
$
Marketplace    $

“ForeverydollarinvestedinCSR,wewillmakethreedollarsback!”

PhilHodkinson
CBA
GroupFinance
Director

2

Exhibit3:CSRStrategy

ASustainableCSRStrategyhas threekeycomponents

Investment

Governance
Structure

Measurement
&Reporting

“Asstewardsofshareholderinterests,boardsshouldbe focusedonthe long-­-term sustainability
ofthefirmratherthanonthemarketnoise”-­- Al Gore,NobelPeacePrizeWinner 2007

3

Exhibit4:BankWestCSRCostsandBenefits

Year    2011    2012    2013    2014    2015    TOTAL
Investment    $3.0m     $5.0m     $10.0m     $10.0m     $10.0m     $38.0m
%Revenue    0.14%     0.20%     0.32%     0.26%     0.22%     0.23%
Direct Benefits    NIL     $4.6m     $8.4m     $7.0m     $8.2m     $28.2m
Indirect Benefits     NIL     $16.7m     $17.2m     $19.8m     $21.7m     $75.4m
TOTAL BENEFITS    NIL     $21.3m     $25.6m     $26.8m     $29.9m     $103.6m

Exhibit5:ANZ’sapproachtoCSR

Aspiresto bea Global LeaderinCSR

Community– “EarningCommunityTrust”

•    Achieve    60    000    hours    of    staff
volunteering
•    Achieve 15%    participation    in    workplace
giving
•    Work with    Indigenous    organisations    and    other    stakeholders    to    develop    and    implement    a   Reconciliation    Action    Plan
•    Political Donations
Marketplace– “PuttingCustomersFirst”
•    To become    a    role    model    of    how    successful    corporations    work    with    and    behave    toward    staff
•    Develop and    implement    social    management    policies    for    Forestry,    Mining    and    Energy    for    the    Institutional    Business
•    Stakeholder forums
•    Public    policy-­-making    process
•    Enable 1500    people    to    participate      in    “Saver    Plus”    in    2011
•    Responsible Lending

Environment– “ManagingEnvironmentalImpactandSupplyChain”
•    Working with    suppliers    to    minimise    the    environmental    consequences    of    business
operations
•    Involved in    discussions    with    clients    about    their    efforts    to    introduce    carbon-­-reducing
technologies and    support    those    investing    in    alternative    energies
•    Improve supply    chain    reporting
•    Integration of    a    new    sustainable    procurement    policy
•    Reviewing water    and    energy    use    and    controls
•    Reviewing waste    improvement    –    recycling
•    Reviewing transportation    –    fuel    efficiency,    greenhouse    gas    emissions,    air    pollution
ratings and    alternative    fuels
•    Reduce environmental    footprint    by    a    minimum    of    5%    per    full    time    staffer    over    a    2
year period    to    12/11
•    Engage with    internal    and    external    stakeholders    to    establish    environmental
performance targets    for    2011-­-2013
Workplace– “Leading&InspiringPeople”
•    Focus on    achieving    24%    female    representation    at    executive    level    in    2011
•    Employment    of    50    indigenous    Australians    in    2011    as    part    of    ANZ’s    Indigenous    Employment    strategy
•    Close the    gap    on    pay    differentials    between    genders    at    all    levels    in    2011
•    Implementation of    “Breakout”    encouraging    colleagues    to    build    strong,
responsive    and    trusted    relationships    with    all    stakeholders
•    Continued development    of    workplace    flexibility
•    Zero harm    approach    on    OH&S
•    Introduction of    Accelerated    Development    programs    for    the    top    20%    of    manager    level
employees

Exhibit6:CBA’sapproachtoCSR

CBA inCSR
Financialliteracyforlife

Community
•    Commonwealth Bank    Foundation,
•    Sports –    Cricket    and    Netball    sponsorships.
•    Major sponsor    of    the    Australian    of    the    Year    awards
•    Legacy Day    Badge    appeal
•    ‘Life Skills’    program    through    Wesley    Mission
•    The national    appeal    partner    for    the    Australian    Red    Cross
Marketplace
•    One of    the    largest    listed    companies    on    the    Australian    Stock    Exchange    and    is
•    included in    the    Morgan    Stanley    Capital    Global    Index
•    CommSec reports    and    updates
•    Key focus    on    financial    literacy:
oDollars and    Sense    website        oKnow Your    Money    website        oStudent    Banking
oPractical Guides    and    publications
Environment
•    Only Australian    financial    institution    involved    in    the    Federal    Government’s    Climate    Clever
program.
•    Offers Generation    Global    Sustainability    Fund    by    Colonial    First    State.
•    Bright    Sparks    Schools    Program      focuses    on    climate    change
•    Green Ambassadors    program    awards    young    people    for    being    actively    involved    in
improving their    local    environment.
•    Partnership with    the    Great    Barrier    Reef    Foundation    through    their    Coral    Futures    program
and ZooX™Fund.
Workplace
Staff in    the    community    –    staff    donate    to    charitable    fund              Workplace    diversity
OHS practices    Shareplan    for    staff
Professional Development    for    staff

Exhibit7:NAB’sapproachtoCSR

NABinCSR
Backingpeople,notjustbankingthem

Exhibit8:Westpac’sapproachtoCSR

WestpacinCSR

Community
•    Major sponsorship    of    rescue    services
•    Lifesaving Australia
•    Rescue boats,    planes    and    helicopters
•    Community involvement    report
•    Indigenous assistance    program
•    Key  partnerships    include    Mission    Australia,    Juvenile    Diabetes    Research    Foundation,    Salvation    Army,    Smith    Family
•    Employee involvement    supported    in
community projects
•    Capacity building    in    communities

Marketplace
•    Social Banking    products    and    services
including those    significant    to
•    financial inclusion    and    literacy
•    Financial literacy    in    disadvantaged    and
remote communities
•    Responsible banking    including    responsible
lending practices
•    Looking after    customers    from    diverse
backgrounds
•    Sustainable supply    chain    management
•    Initial signatory    to    Equator    Principles
•    Green products    such    as    Landcare    Term    Deposit    Account
•    Earth Credit    Card
•    Signatory to    the    UN    Global    Compact    on    Human    Rights
Environment

Workplace
•    Career transitioning
•    Women in    management
•    Work life    balance
•    Training, Learning    and    Development
practices
•    Remuneration
•    Part    time    and    job    sharing
•    Concern reporting    and    whistleblowing
•    Equal opportunity    and    diversity

•    Partnership with    Landcare    Australia
•    Publishes a    Stakeholder    Impact    report    each    year.
•    Reduced their    greenhouse    emissions    by    45%    since    1996
•    Top honours    at    Banksia    Awards
•    Obtained 5-­-star    Australian    Greenhouse    Building    Rating    for    three    properties
•    The great    paper    challenge

Assessment 3: Case Study

The Assessment
This assessment is an essential assessment in BES3500 Off Campus contributing 20% to your total Unit mark. The task is for students demonstrate their understanding of the topic Corporate Social Responsibility (CSR) using a case study.

Case Study Assessment Objectives:
•    To examine how CSR initiatives can serve as a vehicle for developing overall business goals
•    To judge the value of CSR and determine its place in today’s business operations

Learning Outcomes
•    Apply critical thinking, both conceptualization and evaluation, to a range of business scenarios and issues;
•    Incorporate personal ethics and social responsibility into business analysis and decision making.

The Task
Your task is to provide a 1200 words analysis on BankWest Corporate Social Responsibility case study provided, Questions to explore are:
1.    What is the purpose of business?
2.    Should companies become involved in Corporate Social Responsibility? Provide reasons and other working examples.
3.    What other Corporate Social Responsibility initiatives could BankWest undertake? Provide a short justification for each initiative.
4.    Is Corporate Social Responsibility in banking a viable business strategy or is it just a fad? Adopt a critical approach here-question the whole concept of CSR.
Consider these broad headings:
ENVIRONMENT
•    Develop a company-wide environmental policy?
•    Conduct a company-wide environmental risk assessment?
WORKPLACE
•    Undertake a pay equities investigation to determine if men and women working in the same role at the bank receive the same pay.

MARKETPLACE
•    Establish BankWest as an arranger of finance for renewable or ‘green’ energy projects in Australia.

COMMUNITY
•    Build the profile of the Foundation by setting up a program where staff can provide approved pro-bono work to support Foundation partners eg IT can help build a website; marketing can help write a marketing plan; legal can read over some contracts…

Is Corporate Social Responsibility in banking a viable business strategy or is it just a fad?
BankWest is preparing to invest $38 million over 5 years into CSR with a direct return of only $28.2 million. This represents a loss to the bottom line. However, the indirect benefits are estimated to generate $103.6 million and it is in this area that the Bank believes it will profit.

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Category: Essays

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